Time constrained project- Business Finance

Constrained Project-
Business Finance

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Classify the costs according to their nature.................................................................................3
TASK 2............................................................................................................................................6
Provide recommendation and cost reduction strategy.................................................................6
TASK 3............................................................................................................................................7
Preparation a 12 - month forecast/budget for the business up to 30 April 2023.........................7
TASK 4..........................................................................................................................................10
Based on the facts in the forecast and budgets, evaluate Dysonica's performance...................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business finance refers to the money and credit that a company uses. The financial
foundation of a corporation is critical. Finance is necessary for the acquisition of assets,
products, and raw materials, as well as other economic activities. Let's look at the definition of
business finance in more detail. The capital invested by the entrepreneur to start the firm is
insufficient to meet the company's financial obligations (Connolly, and Bank, 2018). As an
outcome, the entrepreneur must find a strategy to generate revenue. To keep the company
running, a thorough examination of financial demands and options for meeting those needs must
be conducted with the express goal of achieving good financial management. The following
report highlights the case of Dysonica Plc. The report is divided into four tasks. Task one talks
about different costs of the business and how the business segregates these costs into heads like
fixed cost, variable cost and semi variable costs. It also talks about the case of absorption,
marginal and activity - based costing. Task two highlights the recommendation to the business in
the report on how they can reduce the cost and manage their operations efficiently. Task three
highlights the cash flow forecast of the business of Dysonica for 12 months upto 30th April 2023.
And task four gives a performance analysis of the business and how the business is working in
the industry with the help of these forecasted figures in the cash flow forecast of Dysonica.
TASK 1
Classify the costs according to their nature
Cost refers to any expense incurred by a company throughout the entire manufacturing
process for its services and goods. Simply described, it is the expenditure incurred by companies
on purchasing and selling things (Babones, Åberg, and Hodzi, 2020). When businesses
manufacture items, they suffer two sorts of expenses: variable and fixed costs.
Variable costs are any expenses that change based on how much a company produces and
sells. This implies that variable costs rise with rising output and fall with lower output. Some of
the most common types of variable expenses are labour, utility bills, commissions, and raw
materials.
Fixed expenses, on the other hand, are costs that remain constant regardless of how much
money a company makes. These expenses, such as rent, property tax, insurance, and
depreciation, are generally unrelated to a company's specific economic activity.

A semi-variable cost, also known as a mixed cost, is something that has both fixed and
variable components (Triantis, 2018). Costs remain constant until a specific amount of output or
consumption is reached, at which point they become variable. A fixed cost is usually incurred
even if no product is created.
Fixed Costs £ Variable
Costs
£ Semi-variable
Costs
£
Machinery 1500 Raw materials 15000 Office and
sales staff
9000
Factory and
storage rent
18000 Direct labour 17500 Logistics 3000
Utilities 500
Insurance 500
Total: 20500 32500 12000
"Output" or "single output" pricing is another name for unit costing. The firm that produces
a single product on a huge scale on a continuous basis uses unit costs. The cost units are all the
same. Furthermore, the items have a consistent, homogenous appearance. This product is not
made in a continuous manner. The key distinction between unit and process costs is this.
Absorption costing:
Absorption costing is a costing method that takes into account all manufacturing costs.
Management use this method to absorb the costs of a product. The costs include both direct and
indirect charges. Direct expenditures include the cost of materials and labour used in the
manufacturing process. Indirect costs include things like factory rent, administrative fees,
compliance, and insurance.
Absorption cost formula = (Direct labour cost + Direct material cost + Variable
manufacturing overhead cost + Fixed manufacturing overhead) / No. of units produced
Understanding the notion of the The AC formula is important because it helps a company
determine a product's contribution margin, which is used in the break-even analysis. The
company may determine the number of units it needs to produce to break even based on the
break-even study (Farag, and Johan, 2021). Furthermore, because the additional units do not